Nonprofit, Its CEO and Board Members Dabble in Real Estate; Ventures Raise Question of Potential Conflict of Interest; THE BUSINESS OF BODY PARTS

Doyle, Jim, St Louis Post-Dispatch (MO)

Mid-America Transplant Services, the regions largest provider of
donated human organs, moved into its gleaming new headquarters in
2008 in the Highlands at Forest Park off Highway 40.

Highlands Plaza Three was the product of a joint venture between
Mid-America and Balke Brown Associates, a St. Louis-based
development firm. But it is just one piece of an extensive
relationship among Balke Brown, Mid-America and one of Mid-Americas
for-profit subsidiaries: MTS Partners LLC.

Those business ties include ongoing real estate deals involving
the investments of Mid-America, its chief executive, Dean Kappel,
and two board members a commingling of corporate and personal
investments that raises potential conflicts of interest.

In these transactions, Kappel appears to juggle various financial
interests as Mid-Americas chief executive who directs the nonprofit
organizations multi-million-dollar business dealings with Balke
Brown and as an individual investor in one of Balke Browns nearby
office-and-retail buildings, Highlands Plaza Two. Kappel invested
$75,000 in Highlands Two through MTS Partners.

Kappel said that Mid-Americas chairman, the Rev. Richard
Ellerbrake, and vice chairman, Dr. Robert Saylor the director of
ethics for Mercy Hospital Springfield also invested personal funds
in Highlands Plaza Two.

Im not quite sure how that could be a conflict of interest,
Kappel said. Balke Brown brought in a number of individual
investors. I dont think we got any sweetheart deal. ...We were
committed to the Highlands Plaza area and thought frankly it was a
good investment.

Mid-America also invested $375,000 in MTS partners and has a
direct controlling interest of 47 percent in the subsidiary,
according to a 2010 tax filing.

Such an array of intermingled corporate and personal investments
all under the control of the chief executive and the board appears
to potentially violate Mid-Americas own conflict of interest policy.
The policy dictates that interested persons such as officers,
directors and managers shall refrain from engaging in private or
professional relationships where there is an existent or potential
conflict of interest or where there would appear to be a conflict
between the interested persons private or business interest and the
interest of MTS.

A conflict of interest, the policy states, arises when an
interested person may benefit personally from a decision he or she
could make.

The policy requires board scrutiny of an ownership interest in
any entity in which Mid-America has business dealings, or an
investment interest in an entity with which the nonprofit is
negotiating a transaction or arrangement. It also requires
disclosure of potential conflicts of interest to the companys board
of directors.

Dr. Will Ross, an associate dean at Washington University School
of Medicine, said that he has served on Mid-Americas board since
1999 and was unaware that Kappel and two board members had invested
personal funds in Highlands Plaza Two.

I dont know if those investments would be improper, he said. Were
committed to operational efficiencies. I can assure you that
everything here is above board.

Kappel said he believed that the boards executive members were
made aware of these personal investments, but could not recall any
board discussion as to whether the investments presented conflicts.

At stake are multimillion-dollar deals involving the sale and
lease of two office buildings and apartments in the 26-acre
Highlands at Forest Park development project, the former site of the
St. Louis Arena/Checkerdome.

Scott Harshbarger, a former Massachusetts attorney general, said
it was important that nonprofit boards of directors had effective
strategies to identify such issues and to make sure that nothing
hinders the nonprofits ability to make sound business decisions and
negotiate arms-length transactions. …

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